The reasons that explain why countries import products and services from other countries are perhaps less obvious. As with exports, the purposes served by imports vary from country to country. It is reasonable to ask why a country such as the United States, with its massive and extraordinarily diverse economy, needs to buy anything from other countries.

In fact, there is only a handful of goods or services that the United States absolutely must import from other countries. With a land area spanning several climatic zones, immense natural resources, and a dynamic workforce, the United States is able to produce, mine, or grow almost every item its citizens need to lead reasonably prosperous lives.

Yet no country today, including the United States, can be totally self-sufficient at a cost that would be tolerable to its citizens. All countries need to—or choose to—import at least some goods and services for the following reasons:

1. Goods or services that are either essential to economic well-being or that consumers desire are simply not naturally available or cannot be produced at home; and,  
2. Goods or services that satisfy domestic needs or wants can be produced more inexpensively or efficiently by other countries, and therefore sold at lower prices. It is helpful to illustrate these points by looking at the case of the United States, precisely because it comes closer to being self-sufficient than any other country. Coal, copper, iron, silver, and nickel are just a few of the natural resources the United States possesses in large quantities that other countries do not possess.

But there are some economically essential items, such as tungsten and oil, that the United States either does not produce at all or does not produce in sufficient quantities to serve current needs at a reasonable price.

The United States cannot now meet its oil consumption needs exclusively through domestically produced oil; as of 2007, the U.S. ranks third in total oil production (8,457,000 barrels/day), but also first in oil consumption (20,680,000 barrels/day).¹ In fact, since Hurricanes Katrina and Rita in 2005, U.S. oil production has been on the decline.² As a result, the United States today imports 59 percent of the oil it consumes.³ Most of these imports come from Saudi Arabia, Mexico, Canada, Nigeria, and Venezuela. In 2008, the United States imported 3.58 billion barrels of crude oil.⁴

The United States could, in theory, abandon foreign oil imports, but it would constitute a very costly step because:

1. it is not clear that domestic reserves of oil, both those that are known and those that have yet to be discovered, could satisfy current domestic demand; and
2. even if U.S. oil reserves were adequate, generating the extra production necessary to fill the gap now filled by imported oil would be extremely costly. Many foreign countries are able to produce oil much more cheaply. Besides, accessing the additional U.S. reserves would require many years of research and development;
3. other energy sources—for example, coal, nuclear power, or hydro-electric power—could conceivably be substituted for oil imports, but complying with the associated environmental regulations, along with the cost of producing additional energy from these sources, would be very expensive. After all, oil currently satisfies more than 40 percent of America’s energy needs (including more than 99 percent of the fuel for cars and trucks) precisely because other domestic sources of energy are either not sufficiently abundant to cover demand or are more expensive to exploit than oil.⁵

Of course, energy conservation measures could also reduce the need for oil imports by decreasing energy consumption of the average American citizen. Energy conservation would be prudent, regardless of which energy supply the United States favors in the future; however, foreign producers would still be able to produce the oil more cheaply, regardless of the level of production. In addition, the scale of energy-saving measures needed to substantially reduce U.S. imports of oil would require costly changes in economic activity and lifestyles and have thus far proven to be politically unsustainable.

Electricity produced by hydropower plants built into dams is another example of an essential resource that the United States does not produce in sufficient quantity to meet its consumption needs. The United States imports large quantities of hydropower from Canada.

In the end, it is clear that the United States will depend upon imports to meet its energy needs into the foreseeable future. This is not the same as saying that the United States has no choice but to import oil from other countries. As the preceding discussion suggests, there are alternatives. But those alternatives are less economically and politically feasible than simply continuing to import oil from countries endowed with generous petroleum reserves.

The same logic applies to a number of other resources or products whose domestic supply is limited: the United States—-though not most other countries—-can often find ways to increase production of a commodity, reduce consumption, or identify domestic substitutes. But these alternatives will often prove more costly than continuing to import from other countries.

Moreover, the United States and other nations choose to import many other products that, unlike oil, are not economically essential, but differ in quality or features from equivalent products made at home. One prominent example is foreign-made cars, which, starting in 2007, accounted for more than 50 percent of all cars sold in the United States.⁶

Americans do not buy imported foreign cars because foreign manufacturers produce certain kinds of vehicles that American manufacturers do not; U.S. carmakers produce an extraordinary range of vehicles at a wide range of price levels. But many Americans have concluded that Asian and European car manufacturers produce vehicles with a combination of qualities or features that satisfy their preferences more so than vehicles manufactured by U.S. carmakers.

The same holds true for much simpler products like wine, or cheese, or shoes. All of these and thousands of other items that the United States imports from other countries are still made at home, but some American consumers believe imported versions of these items offer satisfactions that American varieties do not.

The United States has almost entirely stopped producing other goods because of foreign competitive efficiency, in other words, firms in other countries are better able to produce these goods. This is the case with many types of clothing because clothes can be produced at a much lower cost in countries where labor is cheap; most clothes are produced in developing countries. This practice is a source of controversy that we will discuss later.

It is worth noting that the country where a good is produced need not be the same as the country where the corporation that manufactures and sells the good is established. Several American clothing companies, such as Gap, manufacture most of their clothes in developing countries.

The goods that the United States have almost ceased to produce because of foreign competitive efficiency include not only low-tech products, but also some electronic equipment. For example, the United States used to produce VCRs, but it completely abandoned their production because of the superior efficiency of foreign competitors (most notably the producers in Japan).